What Health-Care Reform Means for Seniors

Christine Benz: Hi, I'm Christine Benz for Morningstar.com. What implications does the health-care reform act have for senior citizens? Here to discuss that question is Mark Miller. Mark is an author, a columnist, and also an expert on retirement planning.

Mark, thanks so much for being here.

Mark Miller: Hi, Christine.

Benz: So, Mark, there have been a lot of rumors flying around, a lot of seniors very concerned about what this health-care reform will mean for them personally.

Let's talk about some of the highlights. You had indicated that there will be some implications for prescription drug plans?

Miller: Yeah, seniors certainly are very concerned about it. I think, when you just sort of netted all out, I think, healthcare reform is a modest plus for Medicare and for seniors. Although I think many people aren't convinced to that yet and the proof will be in the pudding. But with respect to prescription drug plans this coming year what we will see will be a couple of things; one, is the infamous doughnut hole starts to shrink, which is the gap in coverage when you get to a certain level on your annual spend and that starts to close.

We're also seeing more of the prescription drug plans starting to introduce gap coverage, meaning that plans that will include some coverage in that doughnut hole. However, they'll be charging higher premiums for it. So, one thing that people need to look out for this year is if you don't think you're somebody that needs is likely to fall under the doughnut hole…

Benz: Which is spending about how much?

Miller: About $2,800 a year as when you fall into when you come back around 4,500 which is the so-called catastrophic level.

Benz: Right.

Miller: But if you don't think you're likely to get that high then a plan with gap coverage probably is more than you need. It's kind of…

Benz: Going to be more costly than you need.

Miller: Yeah, so you might elect to a cheaper plan without the gap coverage, so we'll give one example of how health-care reform is impacting the drug plans.

Benz: Okay. So you had also indicated that the number of prescription drug plans will be going down because one of the goals here was simplification for seniors?

Miller: Yes, for most people depending where you live in a country when you go to shop these plans, there could be several dozen choices, many of them very, very similar, so there has been effort to streamline and have only offerings that have meaningful differences.

So, you might get a letter saying your plan is being terminated for that reason in which case you need to shop for a different one.

Benz: Okay. And also it sounds like there is some assistance for lower income seniors on the prescription drug?

Miller: Yes. There already was an existing program that's been strengthened under the health-care reform while it's called Extra Help.

If you are a low income individual with income below about $16,000, you qualify for this Extra Help program, which basically subsidize 100% of your drug cost. So, it's very important to know about this if you fall into that bracket or for adult children who might be helping elderly parents with these plans.

And if you qualify for, you should be getting a letter from the Social Security Administration in October notifying you that you qualify. If you think you're close and you don't get the letter, it might be worth a visit to the Social Security office where you live to ask them, 'Hey, do I qualify for this.'

And the other, there has been some other improvements to that program to stabilize and so there is less churn and less situations where enrollees are forced to move around between plans. So, there is some very good improvements to that program this year.

Benz: Okay. So, how about on the preventive care front, it sounds like there were some provisions in the bill for that?

Miller: Yeah, another real important provision of health-care reform is that people on traditional Medicare now qualify for free preventive wellness visits and other forms of preventive care. So, one thing to think about here is if you have – if you are using a Medicare Advantage program, the PPO style option – if you are mainly using that because of the preventive services that's less of a reason to go there this year.

The traditional Medicare option might be just as good for you. It's a very important change, very positive.

Benz: So, any other implications for Medicare Advantage patients, anything that they should know as they are navigating health-care right now?

Miller: Well, Medicare Advantage has been a controversial part of health-care reform because the reimbursement rate that the government gives to these insurance companies are going to be gradually brought in line with regular Medicare, so a lot of people will worry that this meant that Medicare Advantage would just disappear, that the programs would be slashed, and in fact it seems that Medicare Advantage is surviving health care reform quite well.

Next year on average the premium charges for Advantage plans are expected to be flat to slightly down, not skyrocketing. There will be some winnowing out of plans as part of this simplification initiative that we were talking about before. But overall, it's projected that enrolment in Advantage plans is going to rise about 5%. So, it's a very robust strong market.